Correlation Between SPDR BOFA and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR BOFA and IShares MSCI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPDR BOFA and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR BOFA MERRILL and iShares MSCI Emerging, you can compare the effects of market volatilities on SPDR BOFA and IShares MSCI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPDR BOFA with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR BOFA and IShares MSCI.
Diversification Opportunities for SPDR BOFA and IShares MSCI
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPDR and IShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SPDR BOFA MERRILL and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging and SPDR BOFA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPDR BOFA MERRILL are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Emerging has no effect on the direction of SPDR BOFA i.e., SPDR BOFA and IShares MSCI go up and down completely randomly.
Pair Corralation between SPDR BOFA and IShares MSCI
Given the investment horizon of 90 days SPDR BOFA MERRILL is expected to generate 1.74 times more return on investment than IShares MSCI. However, SPDR BOFA is 1.74 times more volatile than iShares MSCI Emerging. It trades about 0.24 of its potential returns per unit of risk. iShares MSCI Emerging is currently generating about -0.23 per unit of risk. If you would invest 1,664 in SPDR BOFA MERRILL on August 23, 2024 and sell it today you would earn a total of 155.00 from holding SPDR BOFA MERRILL or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR BOFA MERRILL vs. iShares MSCI Emerging
Performance |
| Timeline |
| SPDR BOFA MERRILL |
| iShares MSCI Emerging |
SPDR BOFA and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR BOFA and IShares MSCI
The main advantage of trading using opposite SPDR BOFA and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR BOFA position performs unexpectedly, IShares MSCI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares MSCI will offset losses from the drop in IShares MSCI's long position.| SPDR BOFA vs. Vanguard Russell 1000 | SPDR BOFA vs. Vanguard Russell 2000 | SPDR BOFA vs. Vanguard Mega Cap | SPDR BOFA vs. Vanguard Russell 1000 |
| IShares MSCI vs. iShares International Developed | IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Frontier | IShares MSCI vs. iShares MSCI Emerging |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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